Textbook Notes (369,067)
Economics (818)
ECON 1100 (224)
Chapter 3

# Chapter 3

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Department
Economics
Course Code
ECON 1100
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Chapter 3: Supply and Demand- An Introduction - Economic models describe the results that stem from the relationships it portrays and also provides an hypothesis about what will happen if any other variables change - Alfred Marshall’s model of supply and demand explains why neither cost of production nor value to the purchaser by itself is sufficient enough to explain why some goods are cheap and others expensive Markets and Prices - Supply as an equation (Q = a + bPs)  'b’ is the reciprocal of the slope of the supply curve - Demand as an equation (Q = c + dPD) o Horizontal intercept is when price = 0 Market: the context which potential buyers and sellers of a good/service can negotiate exchanges Supply Curve: shows the total quantity of a good of uniform quality that sellers want to sell at each price during a particular period of time Quantity Supplied: the total amount of a good of uniform quality that sellers are willing to price and sell at a single specific price during a period of time Demand Curve: shows the total quantity of a good of uniform quality that buyers want to buy at each price during a period of time Quantity Demanded: the total amount of a good of uniform quality purchased at a single, specific price by all buyers during a period of time Equilibrium: occurs when all forces that act on all variables are in balance Equilibrium Price/Quantity: when the cross at intersection Market Equilibrium: occurs when all buyers and sellers are satisfied with their respective quantities at market price Excess Supply (Surplus): the difference between Q and S when Dhe price of a good exceeds the equilibrium price (some sellers dissatisfied) Excess Demand (Shortage): the difference between Q and Q Shen thD price of a good is below equilibrium price (some buyers dissatisfied)
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